A subdued to weak trend in Asian markets may trigger profit taking on the domestic bourses when key indices are at all time highs. Strong FII inflow and revision in earnings estimates by brokerages for companies following strong Q2 results has fuelled renewed surge on the bourses - Sensex jumped 145 points on Friday (10 November) to a lifetime closing high of 13,282.91. Last week, shares of private sector banks were in demand following revision in earnings estimates for FY 2007.
Tokyo stocks fell to a 1-½ month low on Monday (13 November) on worries about the health of the world's second-biggest economy, despite lower oil prices, while a weaker dollar weighed on major Asian exporters. Key benchmark indices in Hong Kong, Japan, South Korea and Taiwan were down by between 0.38% to 1%.
Back home, the open interest in the derivatives segment is on the rise and it may trigger short-term volatility on the bourses.
With expectations that the momentum of earnings growth would be sustained, FIIs have stepped up buying. Strong global liquidity has aided the surge in inflows. By the first few days of November 2006, FII inflow has reached Rs 2237.90 crore (till 9 November). In the month of October 2006, when the earnings poured in, their net inflow totaled Rs 8013 crore compared to an inflow of Rs 4643 crore in August and Rs 5428 crore in September. FII-inflow in calendar 2006 so far has reached $7.14 billion. In calendar 2005, FII inflow was a record $ 10.7 billion.
A section of the market attributes the solid surge on the Indian bourses to increasing recognition of India’s long-term growth prospects. India’s growth drivers are a favourable demography (large share of young population), robust domestic consumption and acceleration in infrastructure creation. Prime Minister Mahmohan Singh has promised a complete policy on infrastructure, including regulatory and institutional framework, to make it attractive for private participation in the near future. The market has soared in the past two years. From 4,644 on 23 June 2004, it has galloped 186% in less than two and a half years.
US stocks were supported on Friday (10 November) by sharply lower oil prices and strong profits from AIG. The tech-heavy Nasdaq Composite Index added 0.58 percent while the blue-chip Dow scraped out a gain of just 0.04 percent.
US crude slipped 4 cents to $59.55 a barrel, extending Friday's 2.6 percent slide after the International Energy Agency, a consuming countries' watchdog, reported a sharp rise in stockpiles for top consumers and forecast a decline in the world's need for OPEC crude.